Title
Presentation, discussion, and possible action regarding resolution no. 27-001 authorizing the issuance, sale and delivery of Texas Department of Housing and Community Affairs single family mortgage revenue bonds or residential mortgage revenue bonds in one or more series and installments; approving the form and substance of related documents; authorizing the execution of documents and instruments necessary or convenient to carry out the purposes of this resolution; and containing other provisions relating to the subject.
End
RECOMMENDED ACTION
Adopt Resolution
BACKGROUND
On October 9, 2025, the Board approved Resolution 26-001, authorizing the issuance of single-family Mortgage Revenue Bonds (MRBs) during the Department's fiscal year ending August 31, 2026, in an aggregate principal amount not to exceed $1,100,000,000. The Resolution authorized the issuance of one or more series of bonds under the Department's existing single-family bond indentures and delegated final approval of each individual bond issuance to an Authorized Representative of the Department, subject to a determination that the issuance was in the best interests of the Department and complied with the parameters established by the Resolution.
During FY 2026, the Department successfully issued approximately $1.05 billion of single-family mortgage revenue bonds, providing continuous access to below-market mortgage financing for first-time homebuyers and veterans across Texas. The Department's issuance volume reflected continued strong demand for bond-funded mortgage loans while remaining within the authorization approved by the Board.
With this item, the Department seeks Board approval of Resolution 27-001 (the "Resolution") authorizing the issuance of single-family Mortgage Revenue Bonds ("Bonds") during the fiscal year ending August 31, 2027, in an aggregate principal amount not to exceed $1,750,000,000, to be issued from time to time under one or more of the Department's existing single-family bond indentures.
Bond proceeds may be used to:
• Purchase Ginnie Mae mortgage-backed securities (MBS) backed by qualifying tax-exempt mortgage loans;
• Finance all or a portion of the Department's down payment assistance, lender compensation, second-lien servicing fees, and other eligible program costs associated with the underlying mortgage loans;
• Pay all or a portion of the costs of issuance of the Bonds;
• Refund outstanding bonds previously issued under the Department's single-family bond indentures; and
• Invest proceeds in one or more Guaranteed Investment Contracts (GICs), as appropriate, until needed for program purposes.
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Resolution Parameters
Consistent with prior annual issuance authorizations, the Resolution delegates final approval of each bond issuance to an Authorized Representative of the Department upon determining that the issuance is in the best interests of the Department and complies with the parameters established by the Resolution.
The Resolution will require that:
• The aggregate principal amount of Bonds issued not exceed $1.75 billion;
• The final maturity of any series not exceed 40 years from its date of delivery;
• The net effective interest rate on any series not exceed the maximum permitted by Texas law (currently 12%);
• The purchase price of any series be no greater than 108% and no less than 95% of principal amount; and
• Any refunding transaction produce a minimum of 3% present value savings compared to the debt service requirements of the refunded obligations.
The Authorized Representative will also determine, based upon prevailing market conditions, whether each series should be issued as fixed-rate or variable-rate obligations.
Market Conditions
The Department experienced exceptionally strong production during FY 2026, issuing approximately $1.05 billion in mortgage revenue bonds and maintaining continuous access to bond-funded mortgage loans throughout the year. Strong borrower demand, combined with the Department's strategy of issuing 100% tax-exempt mortgage revenue bond transactions, has enabled the Department to continue offering some of the lowest mortgage rates available to eligible Texas first-time homebuyers and veterans.
Interest rates have moderated from their recent highs as inflation has continued to ease and financial markets anticipate additional monetary policy normalization. While mortgage rates remain elevated relative to historical averages, forecasts generally anticipate gradual improvement over the coming year. Lower mortgage rates, coupled with continued demand for affordable homeownership opportunities, are expected to support continued utilization of the Department's mortgage programs.
The Department will continue to monitor capital market conditions, mortgage demand, and housing market trends throughout FY 2027. The annual issuance authorization provides the flexibility to adjust the timing, size, and structure of bond transactions to respond to changing market conditions while maintaining uninterrupted program availability.
The requested $1.75 billion authorization is intended to provide sufficient capacity should market conditions support increased production or require more frequent bond issuances. Approval of this authorization does not obligate the Department to issue the full amount; rather, it establishes the maximum authority necessary to respond efficiently to borrower demand and favorable market opportunities.
This annual authorization provides several important benefits to the Department by allowing it to:
1. Maintain flexibility to issue bonds when market conditions are most favorable.
2. Better manage interest rate, pipeline, and market execution risk.
3. Continue providing Texas homebuyers with uninterrupted access to bond-funded mortgage loans throughout the fiscal year.
Department Contribution
For each series of Bonds issued under the Resolution, the Department's contribution will not exceed $10 million and will be used to fund a portion of the down payment and closing cost assistance, lender compensation, second-lien servicing costs, and other eligible costs associated with the acquisition of qualifying mortgage loans, as well as all or a portion of the costs of issuance.
The Department's contribution will be funded from amounts available within the applicable bond indenture. The Resolution also authorizes the payment of up to $10 million of capitalized interest from the applicable indenture, if necessary.
These amounts represent maximum authorized limits. Actual Department contributions and capitalized interest are expected to be less than the amounts authorized by the Resolution.
Summary
Staff will continue to work closely with the Department's financial advisor, bond counsel, underwriters, and other financing team members to ensure that each bond issuance is economically beneficial and consistent with the Department's mission and financing objectives.
The requested authorization establishes the maximum aggregate principal amount of Bonds that may be issued during FY 2027. Actual issuance volume will depend upon borrower demand, mortgage market conditions, available tax-exempt volume cap, and prevailing capital market conditions, and may be substantially less than the amount authorized by the Board.